True story: A national shipper has a meeting with a major retailer. He is told to produce his third-party audit certification and provide evidence of his water testing and other food safety measures that he has previously been told he is obligated to comply with. The importance of food safety as the paramount value of the retail chain is emphasized.

The meeting also covers shipping schedules. He is given a list of warehouses with weeks indicated when this national shipper will not be supplying product to those warehouses. Why? It is explained to the shipper that during these weeks on the shipper’s product lines, the indicated warehouses will be doing a “locally grown” program and the retailer will be buying from local suppliers.

Our shipper is a big boy and accepts the loss of business gracefully. He does ask one question though: “What do you require as far as food safety goes of these local suppliers?”

The category manager on the other side of the table looks at the shipper with steely eyes and says: “Never raise that subject again if you want to get another PO from my office.”

As we roll into summer, we have locally grown programs blossoming all across the country, which means that food safety standards, so carefully developed after the spinach crisis, are, for the most part, being tossed aside without a second thought.

And we are hearing about it at the Pundit. The details are different but the storyline is always the same: national or regional grower/shippers get preached to by retailers about the importance of food safety, the grower/shippers spend substantial amounts of money to conform to the best standards… then they lose the business to completely unaudited, uncertified, untested local growers.

What is behind retailers’ sudden abandonment of their own food safety standards? Some of it is a determination to have “locally grown” when there are no suppliers available that meet food safety standards. Yet there also can be a substantial price differential between this locally grown product and what buyers would have to pay to purchase crops from a reputable, third-party-certified shipper.

It is sometimes the case that one can purchase a bushel of some crops for $1.50 at the auction, and it would cost many times that price from someone audited. We know of no retailer donating that price differential to a fund at its state’s ag college to help local farmers practice better food safety.

So although retailers may sell locally grown to meet consumer demand and may do it to be politically correct with local politicians and interest groups, they are also doing it to boost profit margins.

One of the things we learned from the Buyer-led Food Safety Initiative is that buyers are loathe to constrain their supply chains. The California Marketing Agreement came together not under the withering pressure of major retailers but as a processor and shipper initiative.

But the highly diffused nature and fractured production base for locally grown produce means that if we are to achieve comparable standards with locally grown product, it is buyers, and only buyers, that can make it happen — unless and until the government steps in, of course. Though that is probably years away — if ever.

We ran a piece entitled, Getting ‘Locally Grown’ Up To Standard, which highlighted a whole bunch of things that Primus makes available on its website at no cost that growers can do to improve food safety. At very least, every retailer should require any supplier not third-party audited to do the things mentioned in that article:

If retailers direct their suppliers (growers) to the Primus web site, they can:

Develop their own operational Standard Operating Procedures (SOPs) at no charge (formats in Word allowing customization or in PDF as a training exercise). They can return at any time and alter the manuals. http://www.primuslabs.com/dd/index.html

perform self audits on themselves at no charge (the results will be e-mailed to their attention with a benchmark for what we see throughout the industry) http://www.primuslabs.com/fs/self.html

Can access the audit SOPs as well as the guidelines to audits (excellent training for growers and handlers).

Contact someone to work with his suppliers from our Affiliate list. There are Affiliates in Ohio, Michigan, etc. Primus is not involved in this so he can negotiate a price or the suppliers can negotiate a price directly with the Affiliate directly http://www.primuslabs.com/tpa/auditors.asp

This is all provided without Primus generating any revenue.

This would be a substantial step forward. Among other things, though, it would mean that those retailers buying, or allowing their suppliers to buy, at auction would have to ban the practice because they would need to see evidence that these four things were happening before they would buy.

Though this would be a big improvement, it is still a stop-gap. Logically, if a standard is necessary to impose on Dole, for example, it is equally necessary to impose on the smallest grower.

The real problem is that if food safety really is the Number One priority, then produce buyers and merchandisers can’t have the flexibility to waive food safety requirements to achieve some other goal — including buying locally.

The solution is to have a Quality Assurance department that is totally detached from any concerns other than food safety. Before any produce company can sell to a chain, it needs to get approved as a supplier by QA, based on conformance to food safety requirements.

So in planning what to promote and procure, buyers and merchandisers will have to build those plans within the universe of approved suppliers. This will not be pleasant. Chain retailers won’t like it because they will not be price-competitive with local stores that can buy from anonymous sources at public auction.

Small growers won’t like it as the cost and complexity of compliance means that many will be compelled to close down, sell out, consolidate and form co-ops to keep their customers.

Yet there really is no option. The complaint to us may have come in the form of vendors complaining of unfair treatment and they have more than a point, but, beyond our trade issues, how will retail produce executives feel if some locally grown product causes a death and the retail executive knows that the death came about because he waived the chain’s food safety policy?

Every chain needs mandatory food safety standards, universally enforced. The consumer is counting on the retailer to sell only safe food.

A&P had put up for sale all of its 66 Farmer Jack stores in Michigan. Now Kroger is buying 20 of the best locations all over southeast Michigan, including prime locations in places such as Bloomfield Township, Dearborn and Troy. A Wisconsin consultant got to the point:

“I figured Kroger’s would pick all the cherries,” said David J. Livingston, managing partner of DJL Research, a supermarket consultant in Pewaukee, Wis. “That’s what happens when you have a lot of money. You end up getting the best stores.”

The disposition of the remaining 46 stores, most in metro Detroit, is uncertain. Hiller’s, Hollywood, Spartan Stores and various independent grocers have all been mentioned as possible buyers. Many of the stores are likely to be shuttered or converted to non-food uses.

Tim Mason, CEO of Fresh & Easy, said the company has extensively researched the American market and found that consumers go to a variety of different stores to get their groceries and are now clamoring for a one-stop shop.

Because different stores cater to different needs, consumers go to one store to find the lowest prices and other places to get better produce and meat and still other places to find specialty items, said Simon Uwins, chief marketing officer for Fresh & Easy.

“To bring that back together is what we are trying to do,” he said.

However some are skeptical:

Whether Fresh & Easy will deliver that experience is another question, said David Livingston, a supermarket consultant based in Wisconsin.

“It sounds a little far-fetched to me,” he said. “How can they be small stores that offer high quality and low costs. Somewhere in there something doesn’t fit.”

It is hard enough indeed to operate a small store with high quality and low costs. To make the quality and value proposition so great that consumers will change habits and stop the practice of going “to one store to find the lowest prices and other places to get better produce and meat and still other places to find specialty items…” seems very difficult to pull off.

Kroger’s acquisition and Tesco’s announcement illustrate a profound difference between the companies.

The obvious one is that Kroger declined to take over the inner city stores of Farmer Jack, while many of the Tesco locations are in very marginal neighborhoods. And this seems to be part of the plan:

Mason stressed that Fresh & Easy markets would be located in various types of neighborhoods, from affluent areas to places that have often been underserved by traditional supermarkets.

Well, aside from Pathmark, not many substantial chains have wanted to open in these marginal neighborhoods, so it is good that Tesco will try. They will have the advantage of lessened competition, but our experience is that urban markets are tough for large chains.

It is not that the business isn’t there; it is that it is difficult to operate within the law. One urban operator we know, for example, found he got robbed blind every time he ran a night shift to clean and stock the store. The solution? The night crew is locked in the store and the night manager is given instructions to immediately break the glass if there is a fire or other calamity. It has worked like a charm — but is against every law and fire code, and Tesco could never do it.

Another urban store we know brings shoplifters down to the basement to extract some “rough justice” all of their own. Many pay homage to mob-run garbage pick-up services. There is some question if Tesco has a real plan to operate in these kinds of environments.

We’ve been writing in this space for months that despite Tesco’s vaunted consumer research, this was a concept driven by real estate realities and now Tesco is pointing that out as well:

Mason said Fresh & Easy’s smaller store size was dictated not only by consumers’ preferences but also by the realities of the real estate market.

In San Diego, for instance, only one of the seven stores — the Escondido location — is being built new. All the other locations are existing structures, such as a former Albertsons store in Point Loma. “If we had turned up here in California to open up seven big-box stores, we wouldn’t be celebrating the opening of seven new stores — we’d be celebrating seven new lawsuits,” Mason said.

Real estate-driven retail strategies often fail. First there is usually a good reason all this real estate is available — it is mostly subpar. Second, if by some miracle you find a strategy that can utilize it, competitors can quickly compete because of the easy availability of this type of location

Finally, people in a mad dash to add stores often take lots of poor locations. Boston Market failed, in no small sense, because it was so hell bent on growth; it took marginal locations just to expand.

Too many of the locations smell of a desperate attempt to build critical mass and thus utilize the massive warehouse and procurement operation Tesco committed to build. One suspects they would have been better off working with Supervalu or other wholesalers as Tesco acquired excellent locations in a disciplined way over longer periods of time. Then when they reached that mass they could build distribution centers. Note that Target is just now building its first perishables distribution center and that will still be operated by Supervalu.

Contrast this mad dash for locations with the highly disciplined approach The Kroger Company took to expanding in Michigan. A&P preferred to sell all the stores as a group — Kroger had no interest. It wanted what it wanted.

As we mentioned previously, Kroger’s Chairman and CEO David Dillon also questioned the convenience of such a small store — pointing out that a store that doesn’t sell what you want is not convenient. In light of that, re-reading the quote of Fresh & Easy’s Chief Marketing Officer still startles when you realize he is talking about a store a third or fourth or fifth the size of modern supermarkets:

Because different stores cater to different needs, consumers go to one store to find the lowest prices and other places to get better produce and meat and still other places to find specialty items, said Simon Uwins, chief marketing officer for Fresh & Easy.

“To bring that back together is what we are trying to do,” he said.

Kroger, owning Ralph’s, is doubtless watching every move Tesco makes. But being the disciplined operation it is, Kroger also is not going to rush to open an unproven concept, in unproven locations. Maybe Tesco wants to make A&P an offer for those 46 other stores?

Now we turn to almonds, a particularly intriguing exploration because the Almond Board of California is using a marketing order to impose mandatory regulation. We wanted to see what was behind it and how it would work, so we asked Pundit Investigator and Special Projects Editor Mira Slott to see if she could find out more:

Q: Mandatory pasteurization of California almonds will be required starting September 1. How did this ruling come about and what instigated its development? Hasn’t the Almond Board been aggressively pursing food safety for years?

A: To understand the current ruling on pasteurization, it is important to examine the context of how this industry has evolved collectively to determine its own destiny and fate in regard to many things; food safety being one of the most important. Certainly within the last 15 to 20 years, the Almond Board has positioned food safety as a critical component of the marketing order. The industry pulled together to collectively make change for the better and the marketing order provided the legal framework to move forward in a proactive mandatory way, rather than leave it to voluntary compliance.

It has been an evolution learning to take responsibility for problems and get them solved, doing research, global marketing communication, environmental issues, food quality and food safety. With that background, in our case when the salmonella issue hit our industry in 2001, we accelerated work on several fronts. We needed to figure out how a product like ours could get contaminated with a foodborne pathogen like this, which was not clear at the time since prior to that the product wasn’t associated with salmonella, and how the industry could improve safety policies. In 2004, another salmonella incident hastened industry efforts to find solutions, speeding up research on technological alternatives out there to combat dangerous bacteria and salmonella.

In the summer of 2004, the Almond Board instigated an action plan, basically a comprehensive food safety program, not just about pasteurization. It involved revamping Good Agricultural Practices, making food safety information more accessible and customizing it to almond product-specific problems. A key goal was to figure out how to pasteurize product, what technology had to be developed and efforts to guarantee safety to ourselves, our customers and to consumers while assuring that the process wouldn’t debase the natural attributes of products. We wanted to be a provider of safer product but not at the expense of altering the great taste and crunch.

Q: From all you’ve described, it sounds like the almond industry has been building a good foundation to pre-empt potential issues that could surface if and when another food safety incident related to almonds surfaces.

A: In a nut shell, getting out in front of things as fast and professional as you can is a true benefit. Even though arduous and difficult choices have to be made, the industry ends up in a better position to know what to do and how to act collectively when a food safety problem occurs down the line, and avert it spiraling out of control.

Q: Is that what happened in the case of the spinach E. coli crisis?

A: Even before the first salmonella incident, we were working on improving food safety.

The timing of where we were by the time the second salmonella incident hit put us in a far better position to deal with the consequences. We were much further ahead in designing a solution for our industry compared to what happened in the leafy greens industry when the spinach outbreak happened.

Having said that, human nature is such that sometimes it takes a shocking incident to get the industry going. Within the growing community, farmers tend to be conservative and cost conscious. Many have been farming three, four and five generations, and having all these experts telling them they are doing something wrong doesn’t sit right with them. It takes a jolt to get people to notice and take necessary actions that could significantly change the way they do business.

Q: In the case of the spinach outbreak, some executives believe it escalated to crisis mode, in part due to the fragmented nature of the industry, and discombobulated communication with government regulators, customers, consumers and media.

A: The almond industry has been working with regulators on pesticide reduction for maybe 15 years, cutting costs and diminishing the implications of certain pesticides on almond crops. We have a culture of taking these things on, sitting down with interested parties and working with regulators to make them part of the solution. We’ve collaborated in all kinds of different crop testing here in the states in a collective effort to reduce pesticide application. We’ve twice received the U.S. EPA award recognizing our industry for excellence in pesticide abatement and reduction.

Q: When did the pasteurization regulatory process get underway?

A: To detail the process, you’d need to go back to the last three years, when the food safety action plan was developed and adopted by the board. Then the real work began to develop pasteurization technology for our industry. Of course we had nothing. We collaborated with pasteurization and sterilization businesses, and universities that work with pasteurization technology, spending several million dollars. In addition, protecting the integrity of the product involved a huge investment in sensory technologies. We had to make sure we were not shooting ourselves in the foot by improving food safety but altering product quality.

Q: Did you discover a satisfactory solution?

A: Fortunately, we have come up with steam pasteurization systems that kill any pathogens without impacting sensory quality issues. It took thousands and thousands of hours analyzing different research and development projects we funded. It also involved keeping the industry and the regulatory community informed. The regulatory community has been extremely supportive and cooperative. Exemplified by our experience with the EPA, if regulators see you working on a solution and keeping them involved and part of the peer review in the proper way, it works smoothly.

This wasn’t the case with what the spinach industry went through. Half of Washington was banging on the table. The produce industry was playing catch up and reacting defensively. Initiating change and bringing governmental agencies into the fold is a much better way to arrive at a food safety program instead of doing emergency actions.

You need to act as an industry now to implement solutions instead of having them imposed on you. You can be the designer of a more effective program that also meets the needs of the industry. Taking an aggressive stance provides a lot more latitude to do the right thing and do well for the industry.

For the almond industry, it has taken a lot of work making a program acceptable to pass muster with the USDA; to satisfy USDA mandates and make it fair and doable across the industry, providing alternative measures for organic users, etc.

A: We do have USDA inspections of incoming product, analyzing all quality aspects. This is a mandatory requirement for incoming product from growers to the processors. That is the only mandatory inspection auditing procedure we have in place. Some companies employ USDA auditing services for outgoing product to get USDA certificates.

The Almond Board will make sure the pasteurization processing is being properly administered and companies are meeting minimum requirements. USDA will conduct inspections and do spot checks of those plants that must adhere to the pasteurization requirement.

Q: You’ve only mentioned the isolated 2001 and 2004 incidents of salmonella. In the relative scheme of food safety problems, will pasteurizing almonds really make that big of a difference?

A: It’s important to emphasize that the food safety program our industry has adopted is not just about pasteurization. We are working toward addressing all points of the supply chain as food processors. If you have contaminated product it is not the ideal strategy to solely rely on the last part of the supply chain to catch it. We want all parts of the chain involved.

Before 2001 the industry didn’t have a salmonella issue. The problem is so rare, so low, in most cases it is impossible to find. The pathogen was not prevalent in almonds to begin with. Our ability to detect food pathogen problems has improved dramatically in the last 10 years. And discovery of these problems is repeatedly reported around the world. This combination has created a heightened awareness of food safety issues.

Q: A problem inherent in most fresh produce is lack of a kill step to eradicate E. coli and other lingering bacteria. Does pasteurization of almonds eliminate any risk of dangerous pathogens on the product?

A: The pasteurization is effectively a kill step. Our technology will remove any presence of foodborne pathogens from the product. Then it is up to the rest of the supply chain to handle product in a safe fashion. This includes the consumer, as a lot of pathogens are found in the home.

This is a much more difficult problem for leafy greens than for our product. At the same time, it is important to remember that we didn’t have a pasteurization process for our industry until we spent a lot of money and research to find one. Hopefully the methodology to come up with solutions can be translated. It takes conviction by the industry to address the problem head on. It is human nature to think this is an isolated incident. It takes leadership to coordinate an industry in this fashion.

Q: As president of the Almond Board, you must have played a key role in the evolutionary process.

A: Obviously in the aftermath of salmonella incidents in the almond industry, communicating to industry members, customers and consumers was essential. There was real leadership from our industry. A dedicated food safety quality committee on our board was the true genesis, where new technologies and ideas were vetted, where the action took place. I arrived in September 2002, confronting the second incident that hit in 2004, and have obviously been working in this direction to improve food safety throughout my tenure.

Q: From a cost standpoint, is this new pasteurization mandate a big burden for the industry?

A: The increase in cost comes with the benefit of making product more food safe. At the end of the day, the decision is made regardless of cost. It is something we must do. Cost will be integrated into the manufacturing procedures and will become folded into product pricing.

Q: Is it important to have mandatory programs in place?

A: For an industry to rely on 100-percent compliance is important. Our industry for the most part doesn’t have its own consumer brands. Most product is used as in ingredient in other products, although the snack industry is growing quite a bit. It only takes one company to have a compliance issue and it affects the whole industry. The pasteurization rule will be implemented starting September 1, but it is vetted by the industry, all industry created and mandated. This is all about the industry deciding what’s best for industry.

We had the benefit of having an organization like ours to protect the industry and make sure what was communicated to our customers and consumers had the right factual content and that we contacted the right media to deliver the message. I find it sort of surprising the spinach industry didn’t get on top of it quickly. Consumers want to know facts, and what are you doing about it.

We have a team that on a moment’s notice can act if something needs to be taken care of urgently and work with communications to make sure the media is involved. Crisis management is so important. You must be organized ahead of time to get the right facts and information out to the right people.

Many thanks to Richard for filling us in on this important story, filled with lessons for the broader produce trade. Here are 10 key ones:

You have to start with science, and knowing how contamination occurs. This reinforces the enormous importance of the new Center For Produce Safety at U.C. Davis which we reported on right here.

The goal has to be to find a kill step, because otherwise the industry is still vulnerable.

Every commodity and region should get in front of the issue so it can drive the process. Better to drive than to be driven.

The time to act is now — while the jolt from the spinach crisis is still being felt and the whole issue of food safety is a crisis in people’s minds.

Get the regulators involved and let them see you are working on the problems professionally, realistically and expeditiously.

The spinach industry was not prepared, it was reactive and defensive. Don’t get caught playing catch-up.

Even with a kill step, every part of the chain needs to be optimized. It is not an effective food safety policy to expect the last process to catch the problem and fix all the errors at that stage.

Our ability to detect pathogens has advanced so much that many who never thought of their product as dangerous will soon find they are having a food safety crisis.

Kill steps only work up to the point in the process at which they are applied. Vigilance is still required after that point, especially by consumers who can contaminate food at home.

In an industry with few consumer brands, 100% compliance is essential. An outbreak will hurt the whole industry.

Ten commandments for food safety, by an industry segment at the top of its game. It is all very impressive. It is worth noting, though, that a state marketing order cannot require that producers in other states or other countries follow the same food safety procedures. Almond producers may be able to live with that. Producers of most commodities won’t. Once again thanks to Richard Waycott and Almond Board of California for their willingness to share knowledge with the whole industry.

The piece brought a number of messages including this letter from a participant:

Chuck Ciruli and I are on the USDA Fruit and Vegetable Industry Advisory Committee and the United Fresh board of directors. Chuck and I strongly urged the inclusion of “mandatory,” and it was in the preliminary drafts. Only in the June meeting final discussion was “mandatory” removed to obtain approval of a produce food safety recommendation. It is likely insisting “mandatory” remain in the language would have resulted in no recommendation. Is it wiser to speak without the word “mandatory” than to say nothing?

Here is the committee’s January 23/24 meeting recommendation: “Recommendation: The Fruit and Vegetable Industry Advisory Committee advocates a strong partnership between industry and appropriate Federal Government agencies to develop and ensure effective food safety standards that are consistent and applicable to all produce grown anywhere in the United States, or imported into the country. These standards must allow for commodity-specific food safety practices based on the best available science. The Committee urges the Secretary to devote the resources of USDA, including critical research programs, to assist and support industry in initiatives to enhance food safety.”

NOTEthe highlighted bold language: It may be multiple words but it communicates MANDATORY, at least to this writer.

The June 4-5 minutes are not yet posted to provide the exact language. The January record speaks.

Your suggestion that executives of regional boards not be members of the F&V advisory committee is interesting and the impact suggested may be true. Although having served with Matt and Mike, they are articulate, well informed on the process of influencing public policy, add significant substance to the Committee’s discussion, and represent a substantial number of F&V growers. It is unclear the committee would be more “on mission” if such individuals were not part of the process.

The joint positions of United and PMA will be carried well to the appropriate committees and congressmen. All is not lost in articulating the mandatory rationale due to the alleged “watered down” advisory committee June recommendation. Let’s obtain a copy of June recommendation as officially communicated to the Secretary.

We thank John very much for his letter as it is always important to have the perspective of a person actually wrestling with the trade-offs and decisions that had to be made.

In general, John’s letter confirms the outline of what we discussed: After vigorous debate in the final discussion, the word “mandatory” was removed from the resolution in order to “…obtain approval of a produce food safety resolution”.

In fact, John specifically explains to us all that “… It is likely insisting ‘mandatory’ remain in the language would have resulted in no recommendation.”

To clarify the Pundit’s stance, in no way did we intend to criticize the board collectively or any individual for doing, tactically, what was necessary to pass a resolution.

We are, however, raising the question of why positions diverged between the USDA Advisory Committee and the boards of United Fresh and PMA?

And that is where we came to talk about Mike Stuart and Matt McInerney. We want to make clear that the issue is not their competence or knowledge base — in some ways it is the opposite. As full time association executives, they are typically going to be the best prepared, the most informed, the most knowledgeable. It is their full time job to be so expert on these types of issues. They will thus often exercise disproportionate influence.

It also is not anything personal. Mike and Matt happen to be on the committee now. Next appointee round it might be John McClung of the Texas Produce Association or Chris Schlect of the Northwest Horticultural Council. We have plenty of friends in the association world, and they are good people, well meaning, etc.

The issue we were raising is the appropriateness of having people on the Advisory Committee who are, literally, not really free to change their minds and not really in control of their own vote.

No matter how compelling an argument John Shelford and Chuck Ciruli presented at that Advisory Committee meeting in June, the argument was not going to change Mike Stuart’s or Matt McInerney’s vote because they were not voting their personal opinions; they were voting the opinions expressed by their boards of directors, and those directors were not in the room to hear John and Chuck talk.

At best, John and Chuck could hope that they were so persuasive and had such new and previously unthought-of ideas that Mike and Matt would move to table the issue until the next meeting so they could have time to consult with their own boards.

To John’s point, nothing is without trade-offs. If we insist that board members all be free to vote their own conscience, we lose the knowledge of these regional association executives. However, as an industry, we might be able to compensate by providing Advisory Committee members with additional staff support. Perhaps PMA and United Fresh could provide staff to support and feed briefing papers to the Advisory Committee all year long as they do with their own boards.

We also agree with John that all is not lost. We will see the exact words used in the resolution, but a slight diffusion of message won’t stop Tom Stenzel or Bryan Silbermann from making sure the message that PMA and United Fresh voted on calling for mandatory food safety regulation does get to the appropriate parties.

But the fact that all is not lost does not mean an opportunity was not missed. Unity in government relations is crucial for an industry to effectively advocate for itself.

The larger issue here is whether the discrepancy that exists between WGA, FFVA and the national associations points to the need for a new model for industry government relations.

After all, if WGA and FFVA do accurately represent the position of the produce growers of California and Florida in being opposed to mandatory regulation, that is no small matter.

It would seem to imply that PMA and United Fresh — neither really representing growers except coincidentally, but instead picking up the industry at the packer, shipper and processor level — are starting to find themselves in a common community. And that community may have distinct opinions from that of individual growers who don’t pack or ship. This would seem to be filled with implications for a possible merger between PMA and United.